Employees Provident Fund Organisation vs Anil Agrawal

To direct the Respondent/Liquidator to forthwith admit and accept the statutory claim of the Applicant towards provident fund dues amounting to Rs. 44,10,204/- (Rupees Forty-Four Lakh Ten Thousand Two Hundred and Four only), together with Damages and accrued statutory Interest until realization.

To declare that the PF dues constitute a statutory first charge over the assets of the CD and stand excluded from the liquidation estate.

To direct the Respondent/Liquidator to earmark and disburse the aforesaid PF dues, along with Damages and accrued statutory Interest, on a priority and prior to any distribution of proceeds under Section 53 of the IB Code, 2016.

To restrain the Respondent/Liquidator from effecting any distribution of the proceeds or assets of the CD to any other creditors or stakeholders until the statutory provident fund dues, along with Damages and interest, are fully paid and discharged.

To pass an order Condoning any procedural delays, if any, in filing or adjudication of the present Application, in the interest of justice and equity.

The Applicant submits that Shri Vivek Kumar Gupta, Assistant Provident Fund Commissioner, EPFO, Regional Office, Gwalior was duly authorised to file the present application. (Copy of the resolution passed by CBT dated 25.05.1989 is annexed and marked as ANNEXURE A1 to the Application.)

The Applicant submits that in IA No. 186 (MP) 2021 in TP 174 of 2019 (CP (IB) 426 of 2018), this Adjudicating Authority, passed a liquidation order dated 11.08.2023 under Section 33 (2) of the IB Code, 2016 and appointed the Respondent as the Liquidator.

The Applicant submits that the EPF dues constitute statutory liabilities and not contractual debts. Hence, Provident Fund, Gratuity, and Pension Fund dues stand excluded from the liquidation estate in terms of Section 36 of the IB Code, 2016, and are not governed by the IBBI (Liquidation Process) Regulations, 2016.

The Applicant submits that, if any procedural delay is observed in filing or updating the claim, this Adjudicating Authority may be pleased to condone the same, the delay having occurred due to assessment proceedings and procedural difficulties.

The Applicant submits that the PF dues are statutory in nature, protected under the Employees Provident Funds & Miscellaneous Provisions Act, 1952 (the EPF & MP Act, 1952), enacted to ensure social security to employees. It further submits that any minor and unintentional procedural delay ought not to defeat substantive justice or prejudice the employees legitimate statutory entitlements, who depend upon these funds for their welfare and livelihood.

The Applicant submits that the EPFO is a social security organization governed by its own Act, the EPF & MP Act, 1952. The Corporate Debtor/CD is covered under the EPF & MP Act, 1952 and allotted EPF Code No. MP/GWL/0010922000. The CD was legally obligated to comply with the EPF & MP Act, 1952 and its Schemes by timely remitting dues and submitting returns since the date of inception.

The Applicant submits that the CD committed default in remitting Provident Fund and allied dues from May 1998 to November 2024. Consequently, proceedings under Sections 7-A, 14-B, and 7-Q of the EPF & MP Act, 1952, were initiated to determine and recover the dues.

The Applicant submits that upon receiving information regarding the CD being under liquidation, an inspection was assigned to the Area Enforcement Officer, who submitted a report dated 25.07.2024, subsequently forwarded to the Respondent/Liquidator for response. However, no response was received. Consequently, proceedings under Section 7-A of the EPF & MP Act, 1952 were initiated vide summons No. EPF/RO/GWL/ENF/10922/712 dated 04.10.2024. The Officer’s final report dated 12.11.2024 recorded that the CD last filed its ECR in June 2017, and several employees had their exit dates marked, indicating cessation of service and withdrawal of their contributions.

The Applicant submits that the Enforcement Officer calculated PF dues only in respect of employee’s active till June 2017 who had no recorded “date of exit”. The report dated 12.11.2024 lists 17 such employees along with their respective PF dues. (A copy of the Report dated 12.11.2024 is annexed under ANNEXURE A/2.)

The Applicant submits that for the purpose of determining and recovering the PF dues, orders were passed under Sections 7-A, 14-B, and 7-Q of the EPF & MP Act, 1952, dated 04.11.2024, 13.11.2024 and 14.11.2024 respectively. (Copy of the Orders dated 04.11.2024, 13.11.2024 and 14.11.2024 passed u/s 7-A, 14-B and 7-Q separately determining the Provident Fund and allied dues and RRC’s issued in their regard are annexed under ANNEXURE A/3, A/4, A/5, A/6 and A/7 to the Application.)

The particulars of amounts outstanding are as follows:

The Applicant submits that the claim for PF dues amounting Rs. 44,10,204/- was filed on 14.11.2024 with the Respondent/Liquidator. In response Liquidator vide letter dated 25.11.2024 informed the applicant that the aforesaid claim is not in the prescribed format and cannot be accepted due to non-adherence to the time limit as provided under the IB Code, 2016 Liquidation Regulation 16. The Respondent further stated that as the Inquiry and assessment was done Post-Liquidation Commencement Date therefore are non-maintainable. (Copy of the claim letter dated 14.11.2024 and email response dated 25.11.2024 are annexed under ANNEXURE A8 and ANNEXURE A9 to the Application.)

The Applicant submits that the Respondent/Liquidator, by not admitting the Applicant’s claim, has failed to discharge his fiduciary duty. Under Section 35(b) of the IB Code, 2016, the Liquidator is obligated to protect and preserve the assets of the CD, including those held in trust. The employee’s contributions deducted but not deposited constitute trust property under Paragraph 29 of the EPF Scheme, 1952 and therefore, cannot form part of the liquidation estate of the CD.

The Applicant relies on the following grounds:

Section 11(2) of the EPF & MP Act, 1952 contains a non-obstante clause making any amount due from the employer, whether employee or employer contributions, the first charge on the establishment's assets, payable in priority to all other debts. This provision provides a double safeguard, ensuring provident fund arrears enjoy priority over all other debts, facilitating more effective recovery than other acts.

The IB Code, 2016 mandates liquidation assets be taken over only after Provident Fund dues under the EPF & MP Act, 1952 are fully liquidated, ensuring priority payment before creditor distribution.

For the payment of dues, the Appellant has relied on the following rulings:

Sunil Kumar Jain & others vs Sundresh Bhatt & others (Civil Appeal No. 5910/2019), the Hon’ble Apex Court on 19.04.2022 observed that the Provident Fund, gratuity, and pension dues are excluded from the liquidation estate under Section 36(4) of the IB Code, 2016 and are to be paid directly to employees outside the liquidation asset distribution.

In response to the notice issued to the Respondent/Liquidator, a reply affidavit filed on 20.06.2025, and submits that the present application is not maintainable under law.

The Respondent submits that the liquidation of the CD was ordered on 11.08.2023 in I.A. No. 186 of 2021, followed by a public announcement on 31.08.2023, with the last date for submission of claims falling in September 2023. The Applicant, however, filed its claim only on 14.11.2024, i.e., more than a year after commencement of liquidation. Upon due consideration, the Respondent/Liquidator rejected the said claim on 25.11.2024.

The Respondent submits that upon rejection of its claim by the Liquidator on 25.11.2024, the Applicant had a statutory remedy under Section 42 of the IB Code, 2016, to challenge the said decision within 14 days. However, the Applicant failed to do so and has instead filed the present application under Section 60(5) in the year 2025. The Hon'ble NCLAT Principal Bench, New Delhi in Asean International Limited v. Sanjeev Maheshwari, Liquidator of Varun Resources Ltd. (Company Appeal (AT) (Insolvency) No. 1647 of 2023), while adjudicating on similar facts, held that if decision of the liquidator is to be challenged the same has to be done within 14 days from the date of order as per section 42 of the IB Code, 2016 and filing of any application under section 60(5) is a circumvention of process of law and an attempt to circumvent the remedy provided under the IB Code, 2016. (Copy of the NCLAT judgement passed on 20.02.2025 is annexed under ANNEXURE R1 of the Affidavit in Reply.)

The Respondent submits that a creditor is required to file its claim as on the date of commencement of liquidation and not on the basis of any order passed thereafter. The Hon’ble NCLAT, in The Assistant Provident Fund Commissioner (Legal), EPFO v. Chandra Prakash Jain, Liquidator of Khushi Foods Ltd. (Company Appeal (AT) (Insolvency) No. 1743 of 2024), held that claims under Regulations 12 and 16 of the IBBI (Liquidation Process) Regulations, 2016 must be filed as on the liquidation commencement date. Any assessment or claim, including that for interest or damages, made subsequent to the commencement of liquidation cannot be admitted by the Liquidator. Consequently, the NCLAT upheld the Adjudicating Authority’s order and dismissed the appeal. (Copy of the order passed by the Hon'ble NCLAT dated 29.04.2024 is annexed under ANNEXURE R2 of the Affidavit in Reply.)

The Respondent submits that no claims were received from any workmen or employees of the CD during the entire liquidation process.

The Respondent submits that the Hon’ble NCLAT, New Delhi, in Company Appeal (AT) (Insolvency) No. 1743 of 2024, has categorically held that any assessment made post initiation of liquidation cannot be admitted as a valid claim by the Liquidator.

The Respondent submits that the liquidation process of the CD was completed on 11.02.2025. After three unsuccessful auctions, the CD was sold as a going concern, and the sale proceeds were duly distributed.

The Respondent submits that the Liquidator’s decision is proper and requires no interference. The Applicant had erroneously filed its claim in Form F instead of the appropriate form, and despite being informed, failed to rectify the same. The Applicant now seeks, after conclusion of the liquidation process, to reopen and unsettle the same, which is untenable in law.

In response to the reply, the Applicant filed a rejoinder on 04.07.2025 and submits that the Respondent's objection as to non-maintainability of the present application under Section 42 of the IB Code, 2016 is fundamentally misplaced because of following reasons:

The PF dues being statutory and held in trust, do not fall within the liquidation estate per Section 36(4)(a)(iii) of the IB Code, 2016 rendering Section 42 timelines inapplicable.

The Applicant submits that the Respondent’s reliance on the limitation under Section 42 of the IB Code, 2016, is misplaced. The Hon’ble Supreme Court in Sunil Kumar Jain v. Sundaresh Bhatt [(2022) 7 SCC 540] has categorically held that PF dues stand excluded from the liquidation estate. Accordingly, procedural timelines governing creditor claims are inapplicable to such statutory dues.

The Applicant further relies on the judgment of the Hon’ble Supreme Court in Maharashtra State Co-operative Bank Ltd. v. Assistant Provident Fund Commissioner [(2009) 15 SCR 1], wherein it was held that statutory obligations, including damages and interest under Sections 14B and 7Q of the EPF & MP Act, 1952, constitute “amounts due” carrying a first charge and statutory priority, thereby reinforcing the Applicant’s entitlement to such dues independent of creditor claim timelines.

The Applicant submits that the Respondent/Liquidator’s refusal to admit PF dues violates the fiduciary obligation under Section 35(b) of the IB Code, 2016 to protect and preserve trust-held assets. EPF contributions deducted from employee wages but undeposited are trust property per Paragraph 29 of the EPF Scheme, necessitating their prioritization and protection.

The Respondent submits that the Applicant while asserting that the application is within limitation, has simultaneously sought condonation of delay, rendering its stance inconsistent.

The Respondent submits the Applicant’s assertion of having submitted the claim to the Liquidator in due manner and within time is incorrect and stands contradicted by the facts and records.

The Respondent submits that although the EPF & MP Act, 1952 is a beneficial social welfare legislation enacted for the protection of employees, it does not confer upon the Applicant an unaccountable right to file a claim at any time contrary to the procedure and timelines prescribed by law.

The Respondent submits that the assessment proceedings under the EPF & MP Act, 1952 were initiated by the Applicant only after commencement of the liquidation process.

The Respondent submits that upon admission of the CD into CIRP and then liquidation the provisions of the IB Code, 2016 attain overriding effect in terms of Section 238, and therefore prevail over the EPF & MP Act, 1952.

The Respondent submits that despite being aware of non-payment of provident fund dues since 1998, the Applicant took no action until 2024 and has approached this Adjudicating Authority only after completion of the liquidation process, rendering the present reliefs infructuous.

The Respondent submits that though there might not be a bar to conduct assessment post initiation of liquidation but the claim of the EPFO which must be submitted needs to be submitted as on the date of commencement of liquidation and not on the basis of the assessment conducted post initiation of liquidation.

The Respondent submits that the liquidation process of the Corporate Debtor stands concluded, the sale proceeds from the going concern sale have been distributed, and the liquidation bank account has been closed.

The Respondent submits that there is no intention to deny legitimate claims of workmen or employees. However, all actions of the Respondent/Liquidator have been in strict compliance with the provisions of the IB Code, 2016 and applicable regulations.

The Applicant submits that the Respondent’s plea that EPF claims were not lodged within the prescribed timeframe is misconceived and untenable.

The Applicant submits that Respondent's actions demonstrate non-compliance with statutory obligations under the EPF & MP Act 1956 and the EPF dues were wrongly ignored which is a direct violation of the social security principles upheld by the Hon'ble Supreme Court.

The Applicant relies on the decision of the Hon’ble NCLT, Mumbai Bench, in Securities and Exchange Board of India v. Mr. Vishak Ghisulal Jain, Liquidator of Sterling International Enterprises Ltd. (CA No. 12 of 2023, dated 14.09.2023), wherein it was held that moratorium under Sections 14 and 33(5) of the IB Code, 2016, does not bar assessment of statutory dues during the liquidation and that corresponding claims cannot be rejected merely on the ground of delay, subject to non-disturbance of distributions already made under Section 53.

The Applicant further places reliance on M/s Globe Express Services v. M/s MM Cargo, wherein the Hon’ble NCLT, New Delhi Bench (order dated 21.05.2018) observed that "it is only after distribution of Assets that no further claim can be entertained". Therefore, it is evident that this Adjudicating Authority has the power to condone the delay in submitting the claim to Liquidator before the distribution of Assets.

The Applicant further relies on the judgment of the Hon’ble Kerala High Court in Deputy Commissioner (Works Contract), Kerala State Goods and Services Tax Department v. National Company Law Tribunal & Vinod Balachandran (Resolution Professional), W.P.(C) No. 39185 of 2022, which held that while moratorium under Sections 14 and 33(5) of the IBC restrains enforcement and recovery, it does not prohibit determination or assessment of statutory dues during the moratorium period.

The Applicant submits that the assessment proceedings under the EPF & MP Act, 1952 were conducted strictly in accordance with law, after affording due opportunity of hearing to the establishment and the Liquidator, and that the Respondent’s challenge to the validity of the assessment order, without any supporting material, is baseless and unsustainable.

The Applicant submits that the definition of "debt" under Section 3(11) of the IBC includes financial and operational debts. PF dues, held in trust under the EPF & MP Act, 1952, are not financial or operational debts. This distinction has been clearly recognized by the Bombay High Court in Dalmia Cement (Bharat) Ltd. v. Central Board of Trustees, EPFO (W.P. No. 693/2022) which held that Provident Fund dues are statutory trust obligations, distinct from debts owed to creditors.

Whether the claim for dues in the present application has been filed within the prescribed timelines as mandated under the provisions of the Insolvency and Bankruptcy Code, 2016 and the Employees Provident Funds and Miscellaneous Provisions Act, 1952?

Whether a claim based on an assessment made after the commencement of liquidation proceedings is admissible under law?